Professional Documents
Culture Documents
Economic Objectives Profit earning Production of goods Creating Markets Technological improvements
B. Human Objectives Welfare of Employees Satisfaction of consumers Satisfaction of shareholders Helpful to government Utilizing resources properly
C. Social Objectives
Availability of goods Supply of quality goods Co-operation with government Creation of employment
D. Organic Objectives
Survival Growth Earn Recognition and prestige
E. National
Objectives Helping National efforts Development of small entrepreneurs National selfsufficiency Development of skilled personnel
Factors
having a bearing on the business. Can be predicted to some extent. Threat or opportunity. Business environment is the aggregate of all conditions, events and influences that surround and affect the business. -Kevin Davis
INTERNAL ENVIRONMNENT
EXTERNAL ENVIRONMENT
Value System
MICRO ENVIRONMENT
MACRO ENVIRONMENT
Suppliers
Customers Market Intermediaries Competitors Public
Political
Socio-cultural Technological Natural Demographic International
Miscellaneous factors
1.
2.
3. Market Intermediaries
MiddlemenWholesalers,retailers. Marketing agenciesadvertising agencies,media firms,market research firm. Financial intermediariesbanks,insurance companies. Physical distributionwarehouses, transport agencies.
4. Competitors 5. Publics
Public is any group that has actual or potential interest in the business. To achieve this interest,it has its impact on the business. Media Public Local Public
1.
a)
POLITICAL ENV.
Political ideology of government Political stability in country Relation of government with other countries Defence & military policy Centre state government Thinking of opposition party
b) c)
d) e) f)
2. Socio-cultural env.
Language
Caste System Religion Marriage
3. Technological Env.
4. Natural Env.
5. Demographic env.
Education level
Family size & structure Urban-rural population
6. International Env.
Cultural exchange
International agreements & declarations
Income level Distribution of income Demand & supply trends Size of market Industrial growth
Economic policies
Monetary policy Fiscal policy Export-import policy Foreign investment policy Industrial policy Industrial licensing policy
Economic System
Capitalism Socialism Mixed economy
1. VALUE SYSTEM
Set of value adopted and/or evolved by a person, organization, or society as a standard to guide its behavior in preferences in all situations. The value system of the founders and those at the helm of affairs has important bearing on : The choice of business Mission & objective of organization Business policies & practices
Vision statement outlines what the organization wants to be. It concentrates on the future. It is a source of inspiration.
Eg.
American Express Bank-To be most respected bank in the world Bluestar- To provide world class
A Mission statement tells you the fundamental purpose of the organization. It concentrates on the present. It defines the customer and the critical processes. It informs you of the desired level of performance. It is the enduring statement of purpose that distinguishes one business from other similar firms.
4. INTERNAL POWER RELATIONSHIP Support enjoyed by top management from employees, shareholders, BOD-Decision making 5. HUMAN RESOURCES 6. COMPANY IMAGE
7. MISCELLANEOUS FACTORS
Macro Environment
Micro Environment
Internal Environment Business decisions
Process by which organizations monitor their relevant environment to identify opportunities & threats affecting their business. It helps : the organization to identify, understand and adapt to external issues; To anticipate the consequences of the environmental factors; To develop well thought out plans & policies
1.
2. 3. 4. 5.
Understand the current & probable changes in environment To provide input for decision making Appropriate Strategy Formulation Effective utilization of resources Other objectives: To identify the threats & opportunities in env. To identify strengths & weaknesses of business To diversify business in new areas & to keep the business dynamic To forsee impact of various components of business env.
Env. analysis
Strategy implementation
1.
2.
3. 4.
Unexpected events Environmental analysis is not the only factor in strategy formulation Inaccurate data Too much dependence on information collected through env. analysis
1. 2. 3.
4.
5. 6.
7.
8. 9.
To frame policies To ensure optimum utilization of resources To analyze competitors strategies & formulate counter-measure To keep business dynamic & innovative To provide input for decision-making To find out the strengths of business To find out the weaknesses of business To find out the opportunities available to business To find out threats posed to business
10. To know the internal environment 11. To understand market conditions 12. To adjust with technological advancements 13. To understand international events & their impact in business 14. To understand economic policies of govt. & their impact on business 15. To understand political situation & its effects on business 16. To forsee the impact of socio-cultural factors
It refers to the responsibility of decision-makers to take action which helps society & serve own interests. Social responsibility of business means responsibility of business towards customers, workers, shareholders & the community. -As per declaration in International Seminar on Social Responsibility
Social responsibility is to pursue those policies & decisions or to follow those lines of actions which are desirable in terms of its objective & value of our society .
-H.R. Bowen
No discrimination in employment Support for educational institutions Help for charitable causes Modernizing facilities Controlling use of hazardous products
Good public image Avoidance of government interference Moral justification To avoid class conflicts Consumers consciousness Business is a part of society Long term interest of business
Increase in prices Lack of skill to solve social problems Meeting social responsibility deviates from main objectives Shortage of time Regular burden Opposition by other firms in the same industry
Owner
Community Employees
Suppliers
Consumers
Government
To ensure safety of capital To ensure fair & reasonable return on their capital Timely payment of dividend To treat shareholders equally To ensure proper utilisation of invested capital
Giving them appropriate remuneration Providing clean work atmosphere & good working conditions Respecting individual dignity Providing medical facilities, housing, canteen, leave, retirement benefits,etc Adopting incentive system for wage payment Giving them a share of profit as bonus Giving job security Promoting workers participation in management Solving labour problems on time Providing training to employees Providing opportunity for promotion & development
To make available good quality goods at cheap rates To avoid misleading advertisements & bring out reality in advertisements To avoid adulteration To provide after-sale service & to handle customers complaints quickly & carefully To make goods according to the liking & tastes of consumers To make goods available to the consumers at the nearest point
To pay taxes honestly & not to indulge in tax evasion To perform business in lawful manner & observe rules laid own by government Not to exploit government machinery by unfair means i.e. not to bribe government employees
Business enterprises should develop & maintain healthy relations with suppliers Payment to suppliers should be made well on time
To make available opportunities for employment To avoid polluting the environment & work for the improvement of local environment To contribute to the raisin of standard of living To be a partner in social development by establishing charitable institutions, dispensaries, educational institutions,etc Not to resort to indecent advertisements To provide high quality products to society To preserve & promote social & cultural values To take safety measures against possible health hazards
An economy refers to an organizations through which people earn their living. An economic system refers to those norms & rules or institutions which direct an economy
Capitalism is a system in which property is privately owned & economic decisions are privately made. -Fergusan & Krips Capitalism refers to that economic system in which factors of production are privately owned & profit motive is the guiding principle of all production activities.
Private property Freedom of enterprises Competition Profit motive Sovereignty of the consumer Labour as a commodity
Rich variety of goods & services Proper use of resources Inducement to work Efficient production Increase the standard of living Automatic Growth of entrepreneurship Economic freedom
Unequal distribution of wealth Class struggle Exploitation of labour Wasteful competition Business fluctuations & unemployment Disregard of public welfare Lack of co-ordination
Socialism is a kind of system under which the economic system of the country is controlled & regulated by the government so as to ensure welfare & equality of opportunity to the people of the society. MAIN FEATURES: Social & collective ownership Set objectives Economic planning Government control Lack of competition Social welfare Limited private sector
Better solution to basic problems No wasteful advertising No cyclical fluctuations Rapid & balanced economic development No class struggle & exploitation of labour Equitable distribution of income
No proper basis of cost calculation End of consumers sovereignty Difficulty in implementation of plans No importance to personal efficiency & productivity Lack of freedom Veil of secrecy Less initiative
Mixed
economy is that economy in which both public & private institutions exercise economic control
-Samuelson MAIN FEATURES : Co-existence of private & public sector Planned economy & government control Private property & economic equality Profit motive & social welfare
Economic freedom & capital formation Competition & efficient production Efficient allocation of resources Advantages of planning Economic equality Freedom of exploitation
Uncertainty Inefficient planning Lack of efficiency Corruption Constrained growth Black money Wastage
Industrial
policy regulates & controls the industrial development in a country. It deals with all government principles, rules, procedures & policies which affect industrial development of the country.
Deployment of natural resources Increased industrial production Modernisation Balanced industrial growth Balanced regional development Balancing small & large scale industries Determination of area of operation Harmonious industrial relations Optimum utilisation of foreign assistance
Industrial
SALIENT
FEATURES: Free from licensing system Role of public sector Disinvestment in public sector undertakings Foreign investment Changes in MRTP(monopolies & restrictive trade practices)act Workers participation in management Creation of production capacity Promotion of industries in rural areas Reservation of small scale industries
CRITICISM:
Against the Nehruvian model of development Abuses of multinational corporations Guided by International Financial Institutions Favourable to large monopolies Concentration & disparities of income & wealth
Free from red tapism Reduction in corruption Encouraging competitiveness Generation of employment Benefits to consumers Rapid growth
The
fiscal policy is that plan of economic policy which is concerned with raising revenue through taxation & other means & deciding on the level & pattern of public expenditure.
Basic
necessities of the government Redistribution of income & wealth Functional financing Affecting macro variables Supply side economics
Economic
stability Economic growth Full employment Capital formation Reduction in the inequalities of income & wealth Enhancing public sector investment Proper allocation of resources Price stability
Public
REVENUE BUDGET TAX REVENUE +NON TAX REVENUE = REVENUE EXPENDITURE TAX REVENUE:income,expenditure,property,capital, commodities,services NON-TAX REVENUE:currency,coinage,interest receipts, dividends EXPENDITURE:general administration,social & community services,economic services
CAPITAL BUDGET CAPITAL RECEIPTS:net small savings,pf,special deposits,net recovery of loans & advances to states,U.Ts & public sector undertakings CAPITAL EXPENDITURE:loan to states & U.Ts ,economic development,social & community development,defence
Multiple
taxes Direct : income tax,corporation tax,estate duty,wealth tax Indirect : excise & customs duties,sales tax More dependence on indirect taxes Simplification & rationalisation of direct taxes Major source of income Progressive rates of direct taxes Enlarging the tax net
Huge
deficit financing Increasing unproductive revenue expenditure Mounting burden of subsidies Higher shares of indirect taxes in gross tax revenue Higher burden of interest payments Increasing burden of public sector
1) EXPORTING
Exporting is the appropriate strategy when one of more of the following conditions prevail: Volume of foreign business in not large enough to justify the production in foreign market Cost of production in foreign market is high Foreign market is characterized by production bottlenecks infrastructural problems,suppliers Political or other risks of investment in oreign country Co. has no permanent interest in the foreign market. Foreign investment is not favoured by the foreign country
Firm in one country permits a firm in another country to use its intellectual rights(patents,trade mark, copyrights, technology, marketing skills,etc) Advantages: No capital investment,no knowledge & marketing strength,no govt. intervention Eg.:GE of USA licensed its gas turbine technology to foreign producers
A company doing international marketing contracts with firms in foreign countries to manufacture or assemble the products while retaining the responsibility of marketing the product.
Advantages:
Co. does not have to commit resources for setting up production facilities Frees the co. from investing in foreign countries Less risky to start up with Enables the marketer to
Disadvantages: Loss of potential profits from manufacturing Less control over manufacturing Not suitable for hightech products-technical secrets Risk of developing potential competitors.
Company
gives its managers to another company to manage that company for certain period of time. Adv: clients are provided with mgmt skills not available locally & no need to build up skills Disadv: overdependence,loss of control
Set
up plant in foreign land,give technology, expertise-once all done ,return back to home land for a fee Oil refineries,steel mills,cement fertilizers plants,construction projects.
Adv:
Complete control over production & quality & less risk of developing potential competitors Disadv: High cost of production. Problems: Restrictions on type of technology, non availability of skilled labour, infrastructural problems.
Contract
between two companies Sharing-technology, capital,resources Types: Sharing of ownership & management Licensing & franchising Contact manufacturing Management contract
When
there are no commercial transactions between 2 nations because of political reasons , a firm in one of these nations which wants to enter the other market will have to operate from a third country base. Taiwanese entrepreneurs found it easy to enter China though bases in Hong Kong Rank Xerox entered USSR though Indian JV Modi Xerox.
Share
Enhance
long term competitive advantage of the firm by forming alliances with its competitors, existing or potential in critical areas, instead of competing with each other.
Government High
cost Poor infrastructure Obsolescence Resistance to change Poor quality image Supply problem Small sizes Lack of experience Limited R&D & marketing research Growing competition